Tuesday, October 27, 2015

Regional Fed Manufacturing Surveys Weak Again in October

by Bill McBride on 10/27/2015 04:50:00 PM

Earlier from the Richmond Fed: Manufacturing Sector Activity Remained Soft; Volume of New Orders Leveled Off

Overall, manufacturing conditions remained soft in October. The composite index for manufacturing flattened to a reading of −1, following last month's reading of −5. Additionally, the index for new orders leveled off this month, gaining 12 points to end at 0. The index for shipments remained negative, losing one point to end at −4. Manufacturing employment continued to increase mildly this month. The indicator remained at a reading of 3 for a second month.
emphasis added
This was the last of the regional Fed surveys for October. All of the regional surveys indicated contraction in October - although mostly slower than in September - and mostly due to weakness from oil and exports.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through October), and five Fed surveys are averaged (blue, through October) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through September (right axis).

It seems likely the ISM index will be weak again in October, and could possibly show contraction - a reading below 50. (although these regional surveys overemphasize oil producing areas).  The early consensus is for an increase to 51.0 for the ISM index, from 50.2 in September.